Arbitration Versus Mediation

Many have heard the term “alternative dispute resolution” associated with both arbitration and mediation, but may not have understood the difference. Indeed, many use the terms interchangeably even though they are very different procedures.

Both arbitration and mediation were historically voluntary, in that neither could occur without the agreement of all the parties to the dispute (usually via a contract between the parties entered into before the dispute occurred). However, this is changing, as many statutes now require mediation or arbitration as a prerequisite to filing a lawsuit. Both arbitration and mediation are private; a significant advantage when parties do not want to air their dirty laundry in public. Both can occur relatively quickly after the dispute arises, and both can be accomplished for a fraction of the cost of court litigation.

However, that is about all that the two processes have in common.

Mediation

In mediation, a neutral third party called (not surprisingly) a “mediator” tries to facilitate negotiations between the parties. Typically, a mediation will follow the same general agenda. First, the parties will meet together with the mediator and everyone is given an opportunity to introduce themselves and explain their position. The mediator will then usually break up the parties so s/he can meet with them individually. At this point, the mediator will normally try to better understand each side's position while simultaneously pointing out any weaknesses in their cases with the goal of making the parties recognize the benefit of coming together in a settlement rather than proceeding to trial and hoping to achieve the best possible day in court. After some discussion, the mediator will see what sort of terms one party wishes to offer the other, and will then meet with the other party to convey this offer. This back and forth will usually continue until the parties have an agreement or until it becomes apparent that no resolution will be possible. If a settlement is reached, an agreement is put to paper and signed by the parties (and in a number of jurisdictions by the mediator, as well). If a party violates the settlement, it will give rise to a cause of action for breach of contract. If no settlement is achieved, the mediator will declare an impasse, and the case can proceed to trial.

Arbitration

Arbitration, on the other hand, is a much more involved process. When parties to a dispute select arbitration, a person (or sometimes a panel of three or more) called an “arbitrator” acts to investigate the facts, analyze the dispute, and render a decision on the matter. Usually, this is done in a process very similar to a trial, though with looser procedural requirements and shorter time frames. The parties agree to accept the decision of the arbitrator as final and binding and that the decision will be enforced by the courts if either party violates it.

An arbitrator presides over a hearing (the arbitration) in which witnesses testify and documents are considered, much like court litigation. Discovery and pre-hearing procedures are typically limited and abbreviated to accelerate the process and keep costs down, but this can be extended by agreement of the parties. Similarly, the parties can institute other cost-saving measures such as eliminating transcripts and briefs if they are able to agree to these measures. Appeals from arbitration decisions are only available on very limited grounds and are rarely successful. Although arbitration is more formal and expensive than mediation, it is still less expensive and more expeditious than litigation.

The biggest distinction between mediation and arbitration, aside from the differing procedures, is that an arbitrator gets to make a formal decision about how the parties' dispute should be resolved. Unlike a mediation, where a disagreement between the parties merely results in an impasse, in an arbitration the parties never have to agree to the outcome because it is decided for them by the mediator.

Final Thoughts

There is no doubt that both mediation and arbitration can be useful tools to resolving disputes, particularly if time and money are serious concerns. But, as with anything, there can be drawbacks, as well. There is no guarantee of a resolution in mediation, and mediator and attorney fees can become quite significant if the mediation drags on for any length of time. Similarly, arbitrators are not bound by the same requirements or oversight of law judges, so their rulings can often be unpredictable. As someone once said it best, the root word of “arbitration” is “arbitrary” and that is just the kind of result you may get. But, as noted, both procedures may be required by contract or statute, and in most civil cases before a regular law court, a mediation will be ordered by the court at some point before the case can proceed to trial.

As always, if you have questions about the process or laws related to any form of alternative dispute resolution, your best bet is to contact a local, experienced attorney. Your attorney will be able to answer your questions and help guide you through the process of resolving your case or making plans to move forward to trial if that is the best option.

Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.